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This Real Estate Developer Has Been Buying Back Its Own Shares

Every now and then, I like to keep track of companies which have been buying back their own shares. That’s because share buybacks may be a sign that a company’s stock is undervalued.

Peter Lynch, the legendary manager of the U.S.-based Fidelity Magellan Fund, also included buybacks as one of the criteria in his investing checklist. To Lynch, it’s a good sign if a company or its insiders are buying shares.

Of course, management may be tasking the company to buy back shares for other reasons other than its stock being undervalued (some other reasons would be to offset dilution). And even if management feels that the stock’s undervalued, they may well be wrong in their assessment too. But, companies that have been buying back their own shares are still worth digging further into.

With these in mind, let’s take a look at one that has been engaged in buybacks these past few weeks.

The company in question is Oxley Holdings Ltd (SGX: 5UX), a real estate developer and investor.

Oxley has a business presence that extends across eight geographical markets in Europe and Asia. The company’s development portfolio includes residential, commercial, and industrial properties.

Meanwhile, it has investment properties that are in different sectors, such as industrial, hospitality, and commercial. In Singapore, Oxley has interests in hotels (Novotel Singapore and IBIS Singapore) and an industrial property (Space@Tampines).

Oxley has bought back shares on three occasions in the month of June, spending a little over S$0.41 million on a total of 989,100 shares.

In Oxley’s latest fiscal third-quarter earnings (for the quarter ended 31 March 2016), the company had seen a 33% year-on-year increase in revenue to S$202.6 million. The bottom-line saw even stronger growth – profit attributable to shareholders soared by 329% from S$11.9 million to S$51.2 million.

There was substantial revenue recognition from the company’s residential and mixed-residential projects and a S$26 million gain on the sale of a long-term investment in Japan.

Looking ahead, the company believes that it can generate substantial revenue from upcoming future launches of its overseas developments on top of the eight projects which are being completed or set to receive TOP (temporary occupation permit) within the next 12 months.

Oxley’s shares closed yesterday’s trading session at a price of S$0.41.  At that price, the company is valued at 2.2 times its latest book value.

A Foolish conclusion

Companies that are engaged in share buybacks are just a good starting point for investors looking for opportunities. It’s up to the individual investor to dig further and determine for him or herself whether a company’s shares are actually cheap or not.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.